Rand stays strong on exporter flows

2010-12-24 12:55

Johannesburg - The rand remained strong against the US dollar - and at its best levels in almost three years - in thin trade on Friday at noon.

At noon local time the rand was bid at 6.7333 from 6.7482 at its previous close. It was bid at 8.8549 to the euro from 8.8666 before and at 10.4326 against sterling from 10.4078 at its previous close.

The euro was bid at US$1.3127 from its close of US$1.3121

"Exporter flows are constant and the local currency should remain in a range of 6.73 to 6.76 to the dollar for the remainder of the trading day," a local currency trader said, adding that it was likely trading would wind down around 13.00.

Dow Jones Newswires reported that the dollar rose slightly against the yen Friday in Asia trading as Japanese importers' demand for the greenback outweighed selling by exporters after the U.S. currency fell to a 10-day low against the yen overnight.

Dealers said the risk of the dollar falling against its Japanese counterpart in coming sessions was increasing.

"Players have kept testing the upside of the (dollar-yen) pair for about a month and a half," said Yuichiro Harada, senior vice president at Mizuho Corporate Bank, "but as they begin to realize the upside looks heavy, they may test the downside once again."

The dollar had been strong against the yen earlier this month as U.S. Treasury yields rose, but "the link between U.S. bond yields and the (dollar-yen) pair is somehow getting weaker," said Tomohiro Nishida, senior dealer at Chuo Mitsui Trust and Banking. He said investors may have began viewing the rise in U.S. bond yields as a sign of concern over U.S. fiscal health.

The euro, meanwhile, could jump soon against the Swiss franc, as positions in the market to sell euro against Swiss franc have been "rapidly ballooning," a senior dealer at a major bank in Tokyo said.

"It's usually a harbinger of big waves of position adjustments."

Trading volume was thin Friday because of the holiday season, as it had been in recent sessions.

Liquidity in the foreign exchange market this time of year was roughly half the level of early December, Barclays Bank chief FX strategist Masafumi Yamamoto said.

Trading volume was likely to remain thin until December 28, when London markets reopened after the Christmas and Boxing Day holidays, one options dealer at a major Japanese bank said.

"Players will come back to the market in full swing then," the dealer added.